8/1/10: Economics, Politics and Real Estate – Interviews from Freedom Fest 2010
If you’re one of those who take The Real Estate Guys™ to the gym, make sure you carbo load first! This one’s a whopper! Our radio audience only got an hour, but the podcast audience gets the whole enchilada. That way whether you like American or Mexican, there’s something for everyone.
A few weeks back, we went to Las Vegas for the 7th Annual Freedom Fest conference. This was our first time and we weren’t sure what to expect. But after our previous interview with event founder, economist Mark Skousen, we thought it would be worthwhile. It turned out even better than we thought!
After being near the epicenter of the financial earthquake which rocked the real estate portfolios of even the most experienced investors, we’ve put a big emphasis on studying economics. Who cares if you’re expert at fixing up properties, managing tenants or putting together syndications if property values are crashing, tenants don’t have jobs, loans aren’t available, and people are too scared to act?
So we started looking for people who saw it coming, put their predictions in writing and got it right for the right reasons. Hindsight’s often 20/20, but seeing the storm coming 
while there’s still time to shutter the windows is better. You might not be able to avoid bad economic weather, but with advance notice at least you can prepare!
We looked at the lineup of speakers at Freedom Fest and decided this would surely be an eye-opening experience. We were especially excited about Peter Schiff, author of Crash Proof 2.0 (a highly recommended read!). Schiff called the crisis for the right reasons – and way ahead of time. We’re happy to say we got a lengthy interview with Mr. Schiff to see what he’s thinking now – which is the feature of our next show.
While we’re boasting about awesome interviews, we also had a chance to talk with billionaire CEO of Forbes Magazine and former Presidential candidate, Steve Forbes. That interview is coming up in a couple of weeks, so stay tuned! The best way to be sure you don’t miss any of our exciting episodes is to subscribe to our podcast via iTunes (shameless plug). 
Today’s episode is about talking to LOTS of people! It was like one of those speed dating sessions. Robert sat at the microphone from early morning to late at night, and Russ rounded up a long line of interesting people to interview.
Featured in this episode of The Real Estate Guys™ Radio Show:
- Your host, Robert Helms
- Co-host and cat herder, Russell Gray
And a long parade of very special guests (in order of appearance):
Jeffrey Verdon, Attorney, talks about estate planning and asset protection strategies utilized by wealthy individuals; including off-shore entities and a very interesting technique for funding life insurance.
Dave Fessler, Energy & Infrastructure Expert for the Oxford Club. Dave discusses his views on the future of energy and infrastructure and their impact on jobs and the economy. He also comments on “the paradox of thrift” – how consumer savings is actually fueling the recession. He tells us how long he thinks it’s going to last, and where he believes America’s best chance for job creation are right now.
Bob Bauman, Attorney, Former U.S. Congressman, Founder of The Sovereign Society; shares his thoughts on offshore investment, asset protection, second citizenship and the growing interest many people have in diversifying globally.
Vernon Jacobs, CPA, is an expert in international taxation. Vern tells us what to consider when investing or employing asset protection strategies offshore.
Robert Barnes, Attorney, is part one of two back to back interviews with lawyers from a premier tax and investment fraud law firm that went 3 for 3 (that’s pretty good!) in three of the top four high profile tax cases in the U.S. (you’d recognize the names). Mr. Barnes reveals the worst thing you can do when contacted by the IRS.
Robert Bernhoft, Attorney, is part two of our tax and investment fraud attorney interviews. Mr. Bernhoft describes what you can do to proactively avoid problems with both your investors and regulators; and shares how his firm uses specialized “non-litigation” techniques to recover misappropriated funds without going to court.
Steve Hochberg, Chief Market Analyst for Elliott Wave, works closely with Robert Prechter. Prechter’s 2002 NY Times best seller, Conquer the Crash, accurately predicted the current financial crisis. While everyone is running scared of inflation, Steve says DEFLATION is actually the big near term threat. He believes we are “on the precipice of the greatest stock market decline of our lifetime.”
Patri Friedman, Executive Director and Chairman of the Board of The Seasteading Institute. A city on the sea? Really??? Before you write it off as Looney Tunes, go to their website and look at their management team. These guys are all brilliant. We’re talking Stanford, Harvard, Yale. Wow. Have you heard of Pay Pal? Yeah,the founder is on their board. And why were they at Freedom Fest? Take a listen!
Leon Louw, Executive Director of the Free Market Foundation, all the way from South Africa! Why? To raise money to advance property ownership rights for blacks in South Africa. For what it’s worth, we didn’t see any evidence of racism at Freedom Fest, though it was full of “tea baggers”. Obviously, Leon felt people at the event would be supportive of his cause. From our observations he was right. But this isn’t a political interview. any more than our show is political. We just want to understand what people are thinking and doing, and how it creates or undermines real estate opportunities. Think about the ramifications on demand in a market where a large part of the population, formerly locked out, suddenly has access to buy property. Very interesting stuff.
Terry Coxon, author of Unleash Your IRA, shares a powerful concept for maximizing your Individual Retirement Account. We thought we knew all about this topic, but Terry shares a strategy we hadn’t considered. Now we’re hyped to read his book. With the demise of home equity, and a growing number of people predicting a tough stock market (at best); and lending getting even tighter from financial reform, we think IRA’s and rollover 401k’s are one of the BEST sources of private investment capital. That makes this a topic worth exploring!
Ron Holland, editor of two financial newsletters and 30 year financial industry veteran, has something to say on the topic of IRA’s. And it’s concerning. He shares what he thinks is the greatest threat to your retirement account.
Terry Easton, author of Refounding America and contributor to Human Events. Terry is uber-conservative / Libertarian and has a lot to say on the topics of economics, politics and real estate. We came to hear a lot of opinions and it just so happens that Terry has a lot of opinions. But since they come from a long history of study and involvement, we think they’re worth listening to.
All in all, Freedom Fest was a great experience and we’re very likely to attend next year’s event. We met great people, got valuable insights, and had our paradigms stretched (we’ve been icing them since we got back). Most of all, we see the economy and real estate from a much broader perspective. As we continue to seek out markets, opportunities and product niches to invest in, we are convinced a bigger perspective will pay huge dividends.
Remember – our next two episodes feature our interviews with Peter Schiff and Steve Forbes!
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4/11/10: Old School Real Estate -Debt Free Investing
Does debt free mean no leverage? Or are there other ways to optimize return that don’t include mortgages? The Real Estate Guys™ look take a fresh look at an old school concept: investing for cash – even when you don’t have any!
In the old schoolhouse for today’s lesson:
• Your Professor of Profit, Head Teacher and Host, Robert Helms
• Teacher’s Aide and Co-Host, Russell Gray
• Old School Principal and the Godfather of Real Estate, Bob Helms
It’s been said, “There’s no school like the old school.” This is just another way of saying that there’s often great wisdom in fundamental concepts which have stood the test of time. When traumatic events like mortgage meltdowns and Great Recessions occur, they shake the structure of conventional wisdom. What is often left standing are “old school” principals (like Bob!).
So we decided to brush the dust off of some old school ideas and talk about the pros and cons of investing for CASH. Wait! If you love leverage or have no cash, stick with us because there’s something in this show for you too!
Class starts with a Health & Safety lesson on the double-edged nature of financial leverage. Magnified gains are awesome, but magnified losses can leave you cut and bleeding. Don’t ever run with leverage or swing it around wildly.
Our next lesson is in Current Events and begins with the when, how and why purchasing for cash is the best (and sometimes only) option for many opportunities in today’s market. However, our Science book says the caterpillar of cash today can metamorphosis into a butterfly of leverage in the future.
After recess, our Economics class features a discussion of why “cash is trash”. Although it’s fallen out of vogue for bandwagon real estate “investors”, many experts consider real estate a desirable commodity for hedging against inflation.
In Shop class, we discuss how to work with tools to create leverage that doesn’t involve borrowing. Wow! Debt free leverage. Maybe this should be a Physics class?
For Phys Ed, we learn how to play and stay in the game – even if we don’t have any cash of our own. Fun, but sweaty.
Before we know it, the school day is over and it’s time to head home for supper. We guess we’re a little nerdy – because we sure had fun in school today!
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The Great Wealth Transfer is Underway! Which side are YOU on?
Imagine being a passenger boarding the Titanic for its maiden voyage. Today, we all know how that story ended. But what would you have paid to know what was going to happen BEFORE it happened? Or at least while there was still time to save yourself and your loved ones?
The US economy has long been considered unsinkable. When the economic waves of the world get choppy, investors worldwide seek shelter in US bonds. And the US government has been all too happy to sell those bonds and go deeper and deeper into debt. Today, almost daily we hear about record setting deficits and new debt ceilings. It’s easy to be confused and simply tune out. There were people dancing on the deck of the Titanic even as it was sinking. They were too busy having fun.
They say that people who fail to learn from history are doomed to repeat it. If you thought graduation meant no more studying and no more tuition, you might want to think again. It’s been said that in the history of the world, no economy has survived a 98% devaluation of its currency. The US is at 95% today.
What does all this mean? More importantly, what does it mean to you? MOST importantly, what can you DO about it?
We think the first and most important thing a concerned individual can do is get educated. There are great books, podcasts and seminars available. One of our favorite teachers is Robert Kiyosaki and the Rich Dad Company. He’s a guy that takes a lot of criticism, but for our money he tells it like it is better than anyone else that is readily accessible to everyday people. Anyone who threatens the status quo is going to be the target of critics.
We suggest you read his work, listen to his message and ask yourself if it makes sense to you. The key to your success will be your ability and willingness to research, think and act. Most people will keep dancing on the deck. As for us, we’ll be in Scottsdale on April 30th listening to what Robert Kiyosaki, Mike Maloney and Richard Duncan have to say.
Wealth transfers are nothing new. And Robert Kiyosaki thinks a HUGE wealth transfer is imminent if not underway right now. If you are concerned (and you should be), then we encourage you to attend this event also.
For us, it’s a business decision. If we invest the time and money and go to the event, the worst thing that happens is that we spend 3 days hearing that these men have to say and thinking about the subject. Even if we completely disagree, the 3 days of concentrated thought will help us make better decisions. If we pick up just one of two great ideas that we can act upon, we should easily be able to make enough profit to cover the cost of the event. In either case, we’re likely to meet some interesting people – and who knows what opportunities will open up from that? Our guess it will be more profitable than if we stay at home dancing in the deck.
Mike Maloney says this wealth transfer presents one of the GREATEST OPPORTUNITIES in history. We don’t want to to miss it!
We hope to see you in Scottsdale on April 30th. Click here to join us.
Here’s a replay of our radio interview with Mike Maloney on November 18, 2009:
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Squish Happens
Most people believe bubbles “burst”. When people talk about the decline of tech stock values at the turn of the century, they say “the tech bubble burst”. Of course, lately it’s all about the “real estate bubble” bursting. Over the last two years, The Real Estate Guys™ have taken some criticism over one of our TV shows where we said, “Real estate bubbles don’t burst”.
But we’ll stand by that. Bubbles don’t burst – at least not as long as whatever is underneath them is real. And there isn’t much that’s more real than real estate.
So we say bubbles are squishy. In fact, the term “bubble” (in the context of referring to a rapid run up of prices) is really a misnomer. Better to say “balloon”.
When you squeeze a balloon, it squishes. It comes out the sides or goes between your fingers; it just finds someplace else to go.
So you’ve heard that real estate prices have dropped. There’s deflation. Equity is gone. Everyone’s underwater. Life as we know it is over. It’s real estate Armageddon.
Then you see (like we did) today’s Wall Street Journal article, “Hong Kong Land Sale Raises Worry of a Bubble”.
A bubble? Didn’t it burst?
Well, no. Actually, it squished.
According to the Wall Street Journal:
“Government officials here (Hong Kong) grapple with how to cool off overheating property prices”.
When’s the last time you heard “overheating” and “property prices” in the same sentence? It almost seems like an oxymoron, like “reliable copier”.
Here’s another excerpt:
“The big (land purchase) came after (the real estate developer) sold 900 apartment units in a major new residential complex over the weekend for a total of US$541 million.”
If you do the math, that’s over $600K per unit! In ONE weekend. We haven’t seen THAT in the US for awhile.
More…
“In China…home prices have risen as much as 25% in the past year and land values have doubled.”
That’s this past year, as in 2009. You know, when US prices were in their third year of decline.
Now, consider where much of the money that fueled the US real estate bubble came from. Get it?
The bubble squished. But if your perspective is too narrow, you might think it burst. Especially because that’s what everyone says. And if you think bubbles burst, then you will quit the game and hide in your FDIC insured bank account. Meanwhile, as the dollar crashes, you’re savings become worth less and less.
We have two main points:
First, real estate is an asset class unlike any other. It’s real (permanent). Gold and other commodities can also make this claim so, in and of itself, being real doesn’t make real estate utterly unique as an investment.
But, unlike virtually every other investment, real estate’s value is not universal. Real estate values vary by markets and sub-markets, and those markets are global as we can clearly see.
Compare that to gold, which is also real. If an ounce of gold is selling for $1200, it’s the same price all over the world. There’s no squish, except to another asset class.
To really look at it right, you can’t think of real estate as an asset class. You almost have to think of each property, or at least each market or sub-market, as an asset class. So when one is down, another is up. Squish. Like stocks and bonds, gold and the dollar, etc.
But the big thing (our FAVORITE) that makes real estate unique, is that it can be financed with bank or private funding and debt serviced by tenants. This makes it VERY conservative when structured properly. Why? Because even if the property declines in value, as long as it produces enough net operating income to amortize the loan (meaning the tenants are paying down your loan) some day it will be paid off. Then it just generates cash flow forever. That’s a beautiful thing. Form that perspective, squish doesn’t matter that much.
Our second main point is that right now many people are forming new financial paradigms as a result of what they’re seeing and experiencing. The people who lived through the Great Depression came out of it with very powerful convictions about how they viewed and handled money. There were many great attitudes such as frugality, saving; and loyalty and appreciation for the opportunity to work. We would all be better off by adopting these attitudes.
However, many of those same people missed out on some of the greatest opportunities in modern history because they brought a lot of fear and rigidity out of the trauma of the Depression. Many people were hyper-conservative.
To be clear, we aren’t suggesting anyone should take risks they aren’t comfortable with. And we aren’t criticizing anyone’s personal investment philosophy – no matter how conservative it might be. We’re certainly more cautious about the risks we take these days.
We are merely suggesting to be mindful of the temptation to be hyper-conservative in terms of your willingness to be an investor. If you won’t invest in your education or take time to investigate opportunity, you’ve probably decided “investing is too risky” and have effectively quit. You think the bubble burst, the game is over, and there is no opportunity. Or it’s so far off or you’re so out of position that you’re on investing sabbatical. This is probably not you, or you wouldn’t be reading a blog like this. But, there are lots of people who have quit – or are in various stages of quitting. Make sure you know who you are and that you’re honest about it.
Now is a great time to be getting started (or re-started). Talk to the people you know about real estate investing and see what they say – and watch what they do. How are their attitudes changing as a result of the last three years? What’s their game plan going forward? Ask yourself those same questions.
Remember, squish happens. As an investor, you want to pay attention to the flow of capital and try to be on the right side of squish. And since you know squish happens, be sure to structure your deals to survive if you’re on the wrong end of it. We’ll be talking more about this in the future.
Most of all, make sure you take the right lessons out of this Great Recession. The right lessons are those that make you a better investor, not those that push you back to being merely a saver or a non-participating observer. Invest in your education. Investigate and evaluate opportunities. Keep your head in the game, even if you’re on the sideline temporarily.
We’d love to hear from you! Use our feedback page to tell us how this recession has affected your investing philosophy and strategy. What are the people around you saying and doing? Where do you see opportunity and why? What are you doing to broaden your horizon, increase your education and increase your network?
1/3/10: Happy New Year with Gary Eldred – What Does 2010 Hold?
The easiest thing in the world to do is predict the past. But what about the future? As we enter a brand new decade, what does the future of real estate look like? To find that out, The Real Estate Guys climbed the proverbial technology mountain to connect with a real estate sage – all the way from Dubai!
Sitting on the mountain top for this broadcast:
- Your real estate guru, Robert Helms
- Pillow fluffer and co-guru, Russell Gray
- Trump University faculty member, best selling author, seasoned real estate and renowned consultant, Dr. Gary Eldred, PhD.
Digging through technological challenges, The Real Estate Guys mined some golden nuggets of wisdom from special guest, Gary Eldred who called in all the way from Dubai! As someone who has studied, taught, invested, and consulted on real estate for decades, Dr. Eldred has earned the right to have an opinion. We talk stocks, bonds, gold and real estate. Gary tells us which asset class he believes will outperform all others in the new decade – and why.
Gary also reveals his strategy for hedging against economic uncertainty. He tells us which type of mortgage he prefers right now and why. As one of the most well traveled investors we know, we also were intrigued by Gary’s comments China, India and Africa – and how what’s happening there affects real estate in the US and other parts of the world. Of course, since he was calling from Dubai (where he is currently working) and Dubai’s been top of the financial news recently, we made sure to talk about that too!
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Home Construction Slows – Good or Bad?
The AP headline this morning says “Stock Market Slumps as Home Construction Slows”. Oh no! We can hear the pitter patter of mutual fund investors’ feet running to their computers to check the damage to their 401k.
Funny, but when we look at our computer, we see interest rates on 30 year fixed mortgages back under 5%. Even jumbos are under 6%! Meanwhile, gold, oil, car prices and CPI (Consumer Price Index) are all up. (Hint: those are signs of inflation).
When you put all that in the blender, what do you get? Well, it depends on what color glasses you’re wearing. (Too many metaphors? Sorry.)
Here’s the deal plain and simple: In the US, home and apartment construction is not growing as fast as the population. Rents are not falling as fast as prices. Interest rates are ridiculously low. Toss in gobs of people unemployed, which means they’re missing payments and wrecking their credit. They won’t be able to buy a home for awhile, so if they can’t keep the one they have, they will be renting.
So what do we have?
• A growing population and influx of people going from homeowner to renter means more demand for residential rentals.
• Less new apartments and homes coming on line mean less supply.
• More competition for fewer rental units means upward pressure on rents, in spite of a weak job market. Why? Because people need a place to live. Next to food, it’s pretty high on most people’s priority list.
• Low interest rates means if you or your investment partners are credit worthy, you can get great (i.e., low) long term interest rates on loans just before what many believe will be an inflationary cycle. Inflation means anyone in debt will win as the value of the dollar falls. This is why China is a little miffed at Uncle Sam. China holds a lot (if you think a trillion is a lot) of US debt and are concerned about a falling dollar.
• Low interest rates also mean lower payments. Lower payments make it easier to get a property to cash flow without 80% down. To quote from that fabulous book Equity Happens, “Cash flow controls mortgages. Mortgages control properties. Properties will make you wealthy over time.” This is true with or without inflation (i.e., appreciation), because you are using the tenant’s money to pay off the loan. No other investment lets you do that.
Additional opportunities exist for the extra ambitious. We call it finding and forcing equity. How? With less new units coming on line and many banks and overextended owners letting their properties fall into disrepair, there are opportunities to buy someone else’s problem cheap. Then, fix it up, rent it out and wait. If things go your way, you may be able to refinance to get your original investment out – and now you’re in for free. Kiyosaki calls this “infinite return”. We like it.
Of course, it’s not all rosy. Unemployment is still a concern. And financing (especially refinancing) is harder to qualify for. But, if it were easy, then everyone would do it and there wouldn’t be opportunity. Hey, wait a minute. It’s easy to buy mutual funds, isn’t it? And everyone does it, don’t they? Hmmmmm…..
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Is Gold All that Glitters?
The AP reports that gold hit an all time high of $1,118 per ounce today. Do you understand why? Do you REALLY understand? And what does gold have to do with real estate (besides that you dig gold out of the ground)?
Great questions!
Gold’s rise is a prime refection of a falling dollar. Why? Because when the dollar “falls”, it takes more dollars to buy anything that’s real. It’s called inflation. Supply and demand play a factor, so just because the dollar falls, doesn’t mean that gold is going to respond immediately and proportionately. But in general terms, a falling dollar means inflation of things that are real. Things like gold, oil and real estate. Typically, gold really takes off when people are nervous about the dollar. So take that for what it’s worth.
The Real Estate Guys don’t claim to be experts at gold, but it’s something we’re very interested in. We watch the demand for gold, oil and treasuries because they give us insight into where cash is moving. When cash moves into real estate or mortgages, then it helps push real estate values up and equity happens. Do you see the connection?
Russ just got back from the Rich Dad Art of a Deal conference with Robert Kiyosaki. Rich Dad Gold Advisor Mike Maloney was there and we invited him to be on The Real Estate Guys show. We figure it he’s smart enough for Mr. Kiyosaki, we’re interested in talking to him. We want to pick his brains on your behalf and find out what he thinks about the movement of cash and its effect on real estate. Sound interesting? Then stay tuned to The Real Estate Guys! To make sure you don’t miss an episode, subscribe to our free podcast. And while you’re at it, sign up for the newsletter – and tell a friend. When you help us grow the audience, we are able to continue to bring you quality guests and programming. Thanks!
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